Are Large Insurance Companies Better Than Small Ones?

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Melanie Musson
Recognized Insurance Expert

UPDATED: Mar 13, 2020

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When shopping for auto insurance, it can be easy to overlook smaller insurance companies. Major corporations have the advertising budget to ensure people around the country know them. Smaller companies may only be known to a few brokers, or they might operate only in one or two states. Nevertheless, there are a few benefits to buying insurance from a small company, and it’s a good idea to consider them as an option the next time you buy coverage. By getting a wide variety of quotes from as many companies as possible, you can reduce the cost of your insurance and ensure you get the perfect match.

When you get a quote online or from an independent agent, you may not recognize some of the companies in your results. Though a handful of insurance companies hold the majority of policies, there are hundreds of smaller companies serving various niches. Many of these are actually subsidiaries of major corporations, but a few are completely independent. These companies may be locally based within certain communities, and you may be more likely to hear about them from a local agent than online quote sites. When deciding which type of insurance to get, there are a few things you should consider:

  • Price – The company with the most reasonable rates may be the most attractive option
  • Financial Strength – Companies with a poor A.M. Best ranking may have a hard time paying off claims
  • Customer Service – You don’t want to pay for a service product if the employees won’t treat you well.

Other things, such as whether the company is a mutual firm or publicly traded corporation, may matter to you depending on your personal preferences. You may also wish to support a company that has shared political beliefs or makes contributions to a charity you support. For most people, though, an insurance company’s cost, strength and customer service are the primary reasons to obtain coverage.

Benefits of Major Insurers

  • They are usually more financially secure than independent small companies
  • Often offer more innovative discounts and savings programs
  • Claims and customer service report are usually very fast and accessible 24/7
  • Companies are universally recognized, minimizing hassles having insurance validated after an accident

Drawbacks of Major Insurers

  • It’s easy to feel lost or be treated like just another number to a big profit-driven company
  • Lots of money might be spent on advertising rather than the customers
  • You’ll be supporting big business rather than a local economy, which may be important to some consumers
  • Large companies may be politically involved in things you might not support

Benefits of Smaller Companies

  • You might get more personalized attention from your agent, claims staff or other employees
  • Your money may stay within the community if the business is locally owned
  • Rates can often be much lower thanks to the company’s low overhead
  • You might be referred by a local agent that you trust or like working with

Drawbacks of Smaller Companies

  • The company may be a subsidiary of a larger firm, so you may still be supporting that corporation
  • Independent firms may not be financially stable, which can cause problems if you ever file a claim
  • Customer service can be slow and 24-hour support may be unavailable due to staffing constraints
  • There may not be as many discount programs or opportunities

Which Company is Best For You?

When shopping for insurance, your first step should be to get several quotes and determine the cheapest policies. This will enable you to narrow down your search and research only the most promising insurers. You can get your quotes online, and you can also ask for information about different companies at a local independent agent’s office. Agencies are often more representative of small local companies than online sources since major companies can afford to pay for more online advertising, but you can still find quotes from hundreds of companies over the Internet.

Once you’ve narrowed down your list and researched a company’s financial standing and customer service reviews, the final decision is yours to make. The best way to decide whether an insurance company is a good choice is by reviewing it individually and matching a company to your own particular needs and preferences. By looking for reviews, asking around in your community and comparison shopping between companies, you’ll get a good idea of what a company is like and whether it will serve your needs.

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